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Tue 11 Jun 2019 01:30 PM

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Gulf-based NRIs target commercial property for investment

Gulf-based NRIs are among the largest groups overseas to invest in real estate assets in India

Gulf-based NRIs target commercial property for investment

Non-resident Indians (NRIs) increasingly prefer to invest in commercial property segment in India of late, a marked shift from the earlier trend of expat Indians opting for residential property assets back home, real estate consultants have said.

Relatively better capital appreciation and higher rental yield in Grade A commercial assets across India’s commercial centres are said to be reasons for NRIs to opt for this segment.

Availability of corporate clients with long lease period running into 9- or 10-year-old, which make the task of managing commercial property assets much easier, is the added attraction for NRIs for preferring for this segment, industry players said.

“The compelling rationale of good capital appreciation and rental yield has increased NRI investor demand for Grade A offices, IT parks and logistics centres in India,” Shajai Jacob, CEO-GCC, Anarock Property Consultants, told Arabian Business.

A good commercial property can give an average annual rental yield of 6-10 percent, as against a mere 1.5 to 3.5 percent rental yield from residential properties in India. The same holds true for capital appreciation, he added.

Gulf-based NRIs are among the largest groups overseas to invest in real estate assets in India.

Industry sources said the Indian cities with high demand for office real estate, especially Grade A spaces such as malls and co-working spaces are Bengaluru, Mumbai, Chennai, Pune, Hyderabad and Delhi-NCR.

“In Delhi-NCR, Gurugram (erstwhile Gurgaon) has become a major investment destination for NRIs looking at investing in commercial real estate, an industry source said.

Industry insiders said it is the high income group among the NRIs who prefer to invest in commercial property assets in India due to relatively higher capital needed for such investments.

“Good corporate clients would be looking for commercial spaces in the range of 1,500 sq ft to 3,000 sq ft, which make the capital investment much higher than what is required for an average residential property investment,” Gaurav Passi, Associate Vice President at AFS Infrastructure, told Arabian Business.

The big ticket size of commercial properties meant initial investment of $215,000 to $432,000. That is why we are seeing a large number of NRIs from the US and UK, besides the Middle East also investing in this segment,” Passi said.

Industry sources said they have also observed instances of NRIs pooling resources to make investments in commercial properties in cities such as Bengaluru, Chennai and Pune.